Good ideas and innovations are hard to spot and often
come from the most unlikely of circumstances – once
successful their value seems almost self-evident, but
in the early stages a new idea or innovation remains
largely anonymous and in dangerous waters. The
growth of the Danish windmill industry was for example
in the early stage hard to foresee. The utilization of
wind power as a source of energy was not a novel concept
in the 1970s when Riisager (a carpenter by trade)
and others began to experiment with different turbine
designs, nor was it a lucrative endeavor as it for many
years remained, from a market perspective, unprofitable.
Despite this, a small group of enthusiastic (and
idealistic) individuals managed to dramatically improve
existing designs, increasing the kW production
of turbines from 15-30 kW in 1974-1979 to 180-450
kW by 1989. The success of the Danish wind turbine
case was possible because multiple and diverse but
interlinked actors tested varying designs in different
locations, drawing both on their localized learningby-
doing knowledge but also on the successes and failures
of others. Step-by-step what had been a discarded
idea for power production became the foundation of a
large scale sustainable industry. The Danish windmill
story has arguably become an oft-repeated story, but
nonetheless it illustrates a key point: knowledge relevant
for innovation is widely dispersed and is therefore
typically outside the realm of any one individual,
firm or organization.

What is good sustainable innovation policy? And what is good governance for user-led innovation for more
sustainable products and services in specific?
The basic aim of innovation policy is to promote invention and innovation that transforms knowledge and
competence into long-term social welfare. Innovation policy for sustainable development asks what can be
done by government to support products, processes and social innovations that spur and enable more sustainable
lifestyles in specific.
From a policy maker’s perspective, there are two basic approaches to innovation policy: Either, governments
engage into “horizontal industrial policy”, i.e. they design a supportive legal and economic framework, insure
dynamic markets and promote a technology friendly “climate” in society. Or, governments engage in “vertical
industrial policy” and opt for more active - and more intruding - efforts to develop an industry or a technology
with economic incentives and industry-specific market regulation. This latter option has been criticized
by market proponents since “picking the winners” by the state instead of the market is often not very efficient
(“market knows best”). On the other hand, it has its merits in speeding up necessary changes in markets.
Both approaches are, however, focused on entrepreneurs and industries, hence on the supply side of the market.
In times of digitalization, prosumerism and blurring boundaries between supply and demand, another
focus is slowly gaining importance, namely user-led innovation for sustainable products and processes. The
present report hence focuses on the question how innovation policy can spur this kind of innovation with userentrepreneurs
on the demand side of markets in the driver seat. The report identifies the key impact mechanisms
as reported and analysed in the relevant literature. While admittedly this type of research is still scarce
and in its infancy, we know from traditional innovation policy literature that good innovation governance
• is consistent and reliable;
• supports interaction between and offers platforms for all relevant actors: market actors (both: supply and
demand), political actors, societal actors and science, also between venture capitalists and innovators/entrepreneurs;
• designs a supportive innovation infrastructure (education, physical infrastructure, etc.);
• supports a social “climate” that is open for innovation and has a culture for innovation and failure (willingness
to change, open for new opportunity, trust in whom, culture of risk);
• finds the right balance of regulation and free market; and
• designs effective incentives and support programmes.
This is also the starting point for the present report that focuses on the specific requirements of user-led sustainability
innovation.